Income Tax Appellate Tribunal - Hyderabad
Nithyananda Rao ... vs Ito, Ward-2, Karimnagar on 30 April, 2026
आयकर अपील य अ धकरण, है दराबाद पीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad 'B' Bench, Hyderabad
BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT
AND
SHRI MANJUNATHA G. ACCOUNTANT MEMBER
आ.अपी.सं /ITA No.2309/Hyd./2025
Assessment Year 2017-2018
Nithyananda Rao
Volimineni,
KARIMNAGAR The Income Tax Officer,
PIN - 505 302. vs. Ward-2,
State of Telangana. KARIMNAGAR - 505 001.
PAN AAHPV1397E
(Appellant) (Respondent)
For Assessee : Sri AV Raghuram, Advocate
For Revenue : Dr. Sachin Kumar, Sr. AR
Date of Hearing : 23.04.2026
Date of Pronouncement : 30.04.2026
आदे श/ORDER
PER VIJAY PAL RAO, VICE PRESIDENT :
This appeal by the Assessee is directed against the Order dated 19.11.2025 of the learned CIT(A)--National Faceless Appeal Centre [in short "NFAC], Delhi, arising from the penalty Order passed u/sec.271D of the Income Tax Act [in short "the Act"], 1961 for the assessment year 2017-2018.2
ITA.No.2309/Hyd./2025
2. The assessee has raised the following grounds of appeal:
1. "On the facts and in the circumstances of the case, the order of the Id. CIT(A) is erroneous both on facts and in law.
2. The Id. CIT(A) erred in sustaining the penalty of Rs.63,74,600 levied by the AO u/s.271D of the Act.
3. The authorities below failed to appreciate that the Appellant received sale consideration during the Fy 2014-15 and that there are no violations to the provisions of section 269SS of the Act to attract penalty u/s.271D of the Act.
4. The authorities below failed to appreciate the sale agreement and sale deeds filed in proper perspective and erred in observing that there is no reference to the date of receiving sale consideration in the deeds. (Tax Effect: Rs.63,74,600).
5. Any other ground that may be urged at the time of hearing."
3. The assessee has challenged the validity of levy of penalty u/sec.271D of the Act by raising the additional grounds by filing a petition under Rule-11 of ITAT Rules, 1963. The additional grounds raised by the assessee reads as under:
1. "The penalty order dated 17.03.2022 levying penalty of Rs.63,74,600 under section 271D of the Act for the alleged violation of section 269SS of the Act, and the order of Id.
CIT(A)/NFAC sustaining levy of penalty are illegal and bad in law.
3ITA.No.2309/Hyd./2025
2. Both the authorities below failed to appreciate that there is no finding in the assessment order nor there is any satisfaction recorded by the AO in the assessment order in respect of the alleged violation of provisions of section 269SS of the Act, and therefore, the initiation of penalty, levy of penalty and sustaining such penalty are illegal and unsustainable in law and have to be set aside.
3. The penalty order passed by the NaFAC dated 17.03.2022 imposing penalty of Rs.63,74,600 is barred by limitation as per provisions of section 275(1)(c) of the Act read with provisions of TOLA and Circulars issued by CBDT."
4. The learned Authorised Representative of the Assessee has submitted that the additional grounds raised by the assessee are purely legal in nature and for adjudication of the same no new facts or material is required but the same can be adjudicated on the basis of the facts and material already available on record. In support of his contention, he has relied upon the Judgment of Hon'ble Supreme Court in the case of National Thermal Power Co.
Ltd., vs., CIT [1998] 229 ITR 383 (SC).
5. On the other hand, the learned DR has submitted that despite contesting the matter before the JCIT as well as before the learned CIT(A), the assessee did not raise these 4 ITA.No.2309/Hyd./2025 issues and has also not explained satisfactory reasons for raising these grounds first time before the Tribunal.
Accordingly, the learned DR has opposed for admission of the additional grounds raised by the assessee.
6. We have considered the rival submissions as well as relevant material on record. The issue raised by the assessee in the additional grounds is purely legal in nature challenging the validity of the penalty order passed u/sec.271D of the Act on the ground that the Assessing Officer has not recorded any satisfaction while passing the assessment order uSec.143(3) dated 03.12.2019. Therefore, this issue of validity of the Order passed u/sec.271D in the absence of the satisfaction recorded by the Assessing Officer can be adjudicated on the basis of the facts and material available on record and no fresh material or facts are required to be verified for adjudication of the issue which is purely legal in nature and goes to the root of the matter. Accordingly, by following the Judgment of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd., vs., CIT (supra), 5 ITA.No.2309/Hyd./2025 we admit the additional grounds raised by the assessee for adjudication.
7. The learned Authorised Representative of the Assessee has submitted that the Assessing Officer while passing the assessment order has not recorded the satisfaction for initiation of the penalty u/sec.271D of the Act. He has referred to the assessment order and submitted that once the Assessing Officer was not satisfied that it is a fit case for initiation of penalty u/sec.271D of the Act, then, the subsequent initiation of the proceedings for levy of penalty u/sec.271D as well as passing of the impugned order u/sec.271D are not sustainable in law and liable to be set aside. In support of his contention, he has relied upon the following decisions:
i. Judgement of Hon'ble ITAT, Bench-B, Hyderabad in the matter of Kesireddy Ravinder Reddy Vs ITO, ward-11(1), Hyderabad in ITA No. 1617 & 1722 of 2025 dated 11.02.2026.
ii. Judgment of Hon'ble ITAT, Bench-B, Hyderabad in the matter of Venkata Ramana Murthy Bollapragada Vs 6 ITA.No.2309/Hyd./2025 ITO, ward-13(1), Hyderabad in ITA No.1961 of 2025 dated 26.02.2026.
iii. Judgement of Hon'ble ITAT, Bench-A, Hyderabad in the matter of Somireddy Sudhakar Reddy Vs ITO, ward-
9(1), Hyderabad in ITA No. 1505 of 2025 dated 24.12.2025.
iv. Judgement of Hon'ble High Court of Telangana in the matter of Srinivasa Reddy Reddeppagari Vs JCIT in Wp No. 44285 of 2022 dated 26.12.2022.
v. Judgement of Hon'ble High Court of Telangana in the matter of Meghana Avenues Private Limited in Wp No. 24403 of 2025 dated 15.04.2026.
7.1. Thus, the learned Authorised Representative of the Assessee has submitted that in the latest Judgment of Hon'ble Jurisdictional High Court dated 15.04.2026 in the case of M/s. Meghana Pvt. Ltd., vs. CIT in WP. No. 24403/2025 this issue has been again considered and decided by holding that the satisfaction must be recorded in the original assessment order for the purpose of initiation of the proceedings u/sec.271E and 271D of the Act. Thus, the 7 ITA.No.2309/Hyd./2025 learned Authorised Representative of the Assessee has submitted that the penalty levied by the JCIT without recording the satisfaction by the Assessing Officer in the assessment order is not sustainable in law and liable to be set aside.
8. On the other hand, the learned DR has submitted that the assessment order was passed on 03.12.2019--and thereafter, the Assessing Officer referred for the initiation of the proceedings for levy of penalty u/sec.271D of the Act to the JCIT on 09.01.2020 which within a reasonable period from the completion of the assessment order. He has further contended that recording of satisfaction in the assessment order is not a mandatory condition for initiation of the proceedings for levy of penalty u/sec.271D of the Act if the Assessing Officer has manifested his satisfaction for initiation of penalty u/sec.271D by making a reference to JCIT within a reasonable period from the completion of the assessment.
In support of his contention, he has relied upon the Judgment of Hon'ble Kerala High Court in the case of M/s.
VEE Ess Hardwares, Ambalapuzha, Alappuzha District, 8 ITA.No.2309/Hyd./2025 State of Kerala vs. ACIT (Circle), Alappuzha & Anr. In WP (C) No.37927 of 2024 dated 31.01.2025.
9. We have considered the rival submissions as well as relevant material on record. In the case in hand, the Assessing Officer has completed the assessment vide Order dated 03.12.2019 as under:
9ITA.No.2309/Hyd./2025 9.1. Thus, it is clear that in the assessment proceedings the Assessing Officer issued notice u/sec.142(1) of the Act. In response to the same, the assessee filed details called for. The Assessing Officer has noted that the assessee 10 ITA.No.2309/Hyd./2025 has made some cash deposits during the demonetization period and was asked to furnish the source of the cash deposits made. The assessee explained the source that during the last 03 years he has sold some residential plots and admitted capital gains in his return of income filed for the assessment years 2015-2016 to 2017-2018 and therefore, the deposits were made from the cash available in his hand out of the sales of the plot of land. The Assessing Officer was satisfied with the explanation of the assessee which was also supported by the return of income filed by the assessee in the preceding two years as well as current year showing the capital gain from sale of the plot of lands. The Assessing Officer has not recorded any satisfaction for initiation of the penalty proceedings u/sec.271D of the Act for violation of the provisions of sec.269SS of the Act.
Thereafter, the JCIT initiated the penalty proceedings by issuing a show cause notice dated 18.02.2020 and levied the penalty u/sec.271D of the Act vide Order dated 17.03.2022 by considering the entire cash deposits in the bank account as cash received by the assessee during the year under 11 ITA.No.2309/Hyd./2025 consideration against the sale of plot of lands. In the case in hand, the levy of penalty u/sec.271D of the Act is based on presumption of the fact that the entire deposits in the bank account was the sale proceeds received in cash by the assessee during the year which is contrary to the facts recorded and accepted by the Assessing Officer in the assessment order that the source of the cash deposit is the sale of plot of land by the assessee during three years and not only during the year under consideration. Further, undisputedly the Assessing Officer has not recorded any satisfaction in the assessment order for initiation of the proceedings for levy of penalty u/sec.271D of the Act. The Hon'ble Jurisdictional High Court in the case of Srinivasa Reddy Reddeppagari, Kadapa, Andhra Pradesh vs. JCIT, Central Circle, Central Range-2, Hyderabad & Anr. Vide Order dated 26.12.2022 in WP.No.44285 of 2022 reported in 332 CTR 614 (Tel.-HC) has considered an identical issue in Para nos.18 to 25 as under:
18. Sec. 271D of the Act deals with penalty for failure to comply with the provisions of s. 269SS of the Act. Sec. 271D of the Act being relevant is extracted hereunder:12
ITA.No.2309/Hyd./2025 "271D. Penalty for failure to comply with the provisions of s. 269SS (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of s. 26955, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit (or specified sum) so taken or accepted).
(2) Any penalty imposable under sub-s. (1) shall be imposed by the Jt. CIT.
19. Thus, what sub-s. (1) of s. 271D provides for is that if a person takes or accepts any loan or deposit or specified amount in contravention of the provisions of s. 26955, he shall be liable to pay by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. Sub-s. (2) clarifies that any penalty imposable under sub-s. (1) shall be imposed by the Jt. CIT.
20. It would be useful to refer to s. 271E of the Act also at this stage which deals with penalty for failure to comply with the provisions of s. 269T of the Act. Be it stated that s. 269T of the Act provides that no branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it or any specified advance received by it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who had made the loan or deposit or who had paid the specified advance or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if such an amount is twenty thousand rupees or more. As in the case of s. 269SS, s. 269T of the Act also does not apply to the Government, banking company, post office savings bank etc. Sec. 271E of the Act reads as under:
13ITA.No.2309/Hyd./2025 "271E. Penalty for failure to comply with the provisions of s. 269T.-(1) If a person repays any loan or deposit or specified advance referred to in s. 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified advance so repaid.
(2) Any penalty imposable under sub-s. (1) shall be imposed by the Jt. CIT."
21. Thus, sub-s. (1) of s. 271E of the Act provides that if a person repays any loan or deposit or specified advance referred to in s. 269T of the Act otherwise than in accordance with the provisions of that section, he shall be liable to pay by way of penalty a sum equal to the amount of the loan or deposit or specified advance so repaid. Sub-s. (2) clarifies that any penalty imposable under sub- s. (1) shall be imposed by the Jt. CIT.
22. From an analysis of ss. 271D and 271E of the Act, it is seen that both the provisions are pari materia to each other. While s. 271D of the Act would be attracted on a person accepting loan or deposit or specified sum in contravention of s. 26955 of the Act, penalty under s. 271E of the Act would be imposable on a person who makes or repays the loan or deposit or specified advance in contravention of s. 269T. Therefore, in a way, the two provisions are complimentary to each other.
23. In Jai Laxmi Rice Mills Ambala City (supra). Supreme Court considered the question as to whether penalty proceedings under s. 271D of the Act is independent of the assessment proceeding? In the facts of that case, it was found that the penalty order was issued following the assessment order. However in appeal, CIT(A) had set aside the original assessment order with a direction to frame assessment de novo. In the fresh assessment order, no 14 ITA.No.2309/Hyd./2025 satisfaction was recorded by the AO regarding initiation of penalty proceedings under s. 271E of the Act. It was noticed that the penalty order was passed before the appeal of the assessee was allowed by the CIT(A). It was in that context that Supreme Court held as follows:
"The Tribunal as well as the High Court has held that it could not be so for the simple reason that when the original assessment order itself was set aside, the satisfaction recorded therein for the purpose of initiation of the penalty proceeding under s. 271E would also not survive. This according to us is the correct proposition of law stated by the High Court in the impugned order.
As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under s. 271E of the Act, though in that order the AO wanted penalty proceeding to be initiated under s. 271(1)(c) of the Act. Thus, insofar as penalty under s. 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied. These appeals are, accordingly, dismissed."
24. Reverting back to the facts of the present case, we find that petitioner had submitted reply to the show-cause notice on 2nd June, 2022. In his reply, petitioner mentioned that no satisfaction was recorded by the AO in the assessment order as to infraction of s. 269SS of the Act. Therefore, no penalty. could be levied under s. 271D of the Act without recorded satisfaction. In this connection, reference was made to the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (supra) wherein it was clarified that provisions of s. 271E are in pari materia with the provisions of s. 271D of the Act. However, this aspect of the matter was not 15 ITA.No.2309/Hyd./2025 considered by respondent No. 1 while passing the impugned order. respondent No. 1 relying upon the Kerala High Court decision in Grihalaxmi Vision (supra) noted that competent authority to levy penalty is the Jt. CIT. He has also referred to an earlier decision of the Supreme Court in CIT vs. Mak Data Ltd. (2013) 263 CTR (Del) 6: (2013) 87 DTR (Del) 172: (2013) 352 ITR 1 (Del) wherein it was observed that AO has to satisfy himself as to whether penalty proceedings should be initiated or not. AO is not required to record his satisfaction in a particular manner or reduce it into writing. Therefore, respondent No. 1 imposed the penalty under s. 271D of the Act.
25. We are afraid respondent No. 1 had completely overlooked the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (supra). In the said decision as extracted above, Supreme Court had concurred with the view taken by the High Court holding that satisfaction must be recorded in the original assessment order for the purpose of initiation of penalty proceedings under s. 271E of the Act. We have already discussed above that provisions of s. 271E and 271D of the Act are in pari materia. When there is a decision of the Supreme Court, it is the bounden duty of an adjudicating authority, be it an IT authority or any other civil authority or for that matter any Court in the country, to comply with the decision of the Supreme Court."
9.2. Thus, the Hon'ble High Court by following the Judgment of Hon'ble Supreme Court in the case of CIT vs. Jayalaxmi Rice Mills 379 ITR 521 (SC) and Ambala 286 CTR (SC) 159 has held that satisfaction must be recorded in the assessment order for the purpose of initiation of penalty 16 ITA.No.2309/Hyd./2025 proceedings u/sec.271D and 271E of the Act and consequently set aside the order. In the recent Judgment dated 05.03.2026 the Hon'ble Jurisdictional High Court in the case of M/s. Meghana Avenues Private Limited vs. CIT & Others in WP.No.24403 of 2025 Judgment dated 05.03.2026 has again considered this issue in Para nos.12 to 16 as under:
"12. The proceedings under Section 271D of the Act were initiated by the Joint Commissioner on the ground that during the assessment year, the assessee had accepted an amount of Rs.40,00,000/- in cash from its customers on sale of plots/residential house as advance/initial payment. The details of cash received were enumerated in the form of a chart, which showed that such amounts were received from various persons exceeding Rs.20,000/- during the assessment year in violation of Section 269SS of the Act. The assessee took the plea that the assessee had sold its land to various persons who are farmers. They were unable to make the payment in cheque and gave the money in cash. The accountant unknowingly collected cash and deposited in the bank. The amount collected from its customers was below Rs.2 lakhs from every individual. The deposited amount is in the form of cash receipt for sale of individual plots. According to the assessee, under Section 269ST of the Act, a person should not receive an amount of Rs.2 lakhs or more except by way of an account payee cheque, bank draft or electronic clearing system through a bank account or any other electronic mode in respect of a single transaction. Therefore, the question of 17 ITA.No.2309/Hyd./2025 applying Section 269SS and levying the penalty under Section 271D of the Act does not arise. The amounts have been treated as cash receipts and deposited in bank. He made a request to drop the penalty proceedings as it is within the purview of Section 269ST of the Act.
13. In the light of these facts, it is relevant to refer to the CBDT Circular No.09/DV/2016 (departmental view), dated 26.04.2016 on the subject of limitation for penalty proceedings under Section 271D and 271E of the Act. The circular made reference to the decision in the case of Grihalakshmi Vision (supra) rendered by the Kerala High Court. The observations made therein have been treated as 'the departmental view and are extracted hereunder:
"3. The Hon'ble Kerala High Court in the case of Grihalaxmi Vision v. Addi. Commissioner of Income Tax, Range 1, Kozhikode (Available in NJRS 2015-LL-0807-4) vide its order dated 8.7.15 in ITA Nos.83 & 6 of 2014, observed that "Question to be considered is whether proceedings for levy of penalty, are initiated with the passing of the order of assessment by the Assessing Officer or whether such proceedings has commenced with the instance of the notice issued by the Joint Commissioner. From statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner Therefore, only the Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under Section 271D and E are initiated is inconsequential. On the other hand if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is 18 ITA.No.2309/Hyd./2025 incompetent and the proceedings thereafter would be proceedings without authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so the initiation of the penalty proceedings is only with the issuance of the notice issued by the Joint Commissioner to the assessee to which he has filed his reply"
4. The above judgment reflects the "Departmental View". Accordingly, the Assessing Officers (below the rank of Joint Commissioner of Income Tax) may be advised to make a reference to the Range Head, regarding any violation of the provisions of Section 26955 and Section 2691 of the Act, as the case may be, in the course of the assessment proceedings (or any other proceedings under the Act). The Assessing Officer, (below the rank of Joint Commissioner of Income Tax) shall not issue the notice in this regard. The Range Head will issue the penalty notice and shall dispose/complete the proceedings within the limitation prescribed u/s 275(1)(c) of the Act."
14. A perusal thereof would show that the Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings should not be done by the assessing officer. The statement in the assessment order that the proceedings under Sections 271D and 271E of the Act initiated are inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be the proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice by the Joint Commissioner to the assessee to which he 19 ITA.No.2309/Hyd./2025 has filed his reply. This observation of the Kerala High Court in the case of Grihalakshmi Vision (supra), has been adopted as 'the departmental view.
15. From the discussion made hereinabove, it is apparent that the CBDT Circular, dated 26.04.2016 issued on the basis of the observations in Grihalakshmi Vision (supra) by the Kerala High Court is on the subject of limitation for initiation of penalty proceedings under Section 271D and 271E of the Act, wherein it has been held that the competent authority to levy penalty is Joint Commissioner and not the assessing officer. On the other hand, in the case of Srinivasa Reddy Reddeppagari (supra), a coordinate Bench of this Court has referred to the case of Jaya Laxmi Rice Mills (supra) and categorically recorded that the Supreme Court had concurred with the view taken by the High Court holding that satisfaction must be recorded in the original assessment order for the purpose of initiation of penalty proceedings under Section 271E of the Act. Sections 271E and 271D of the Act are in pari materia. When there is a decision of the Supreme Court, it is the bounden duty of an adjudicating authority, be it an income tax authority or any other civil authority or for that matter any court in the country, to comply with the decision of the Supreme Court. The very issue involved in the present writ petition, whether without satisfaction being recorded in the assessment order, penalty can be levied by the Joint Commissioner under Section 271D of the Act was in question in the case of Srinivasa Reddy Reddeppagari (supra). As such, we do not find any grounds made out by the Revenue to take a different view in the instant case.
16. Accordingly, the order, dated 19.10.2022, imposing penalty by the second respondent under Section 271D read with 20 ITA.No.2309/Hyd./2025 Section 274 of the Act and the appellate order dated 04.06.2025 upholding the same by the first respondent are set aside."
9.3.
[[ Thus, the Hon'ble High Court has reiterated this view that the levy of penalty u/sec.271D of the Act without satisfaction being recorded in the assessment order is not sustainable and the same was set aside. By following the Judgment of Hon'ble High Court this Tribunal has also taken a consistent view on this issue in a series of decisions as relied upon by the learned Authorised Representative of the Assessee. In the case of Somireddy Sudhakar Reddy vs. ITO this Tribunal vide Order dated 24.12.2025 in ITA.No.1505/ Hyd./2025 has considered this issue in Para nos.5 to 8 as under:
"5. We have considered the rival submissions as well as relevant material on record. The JCIT, Range Head-9, Hyderabad has levied the penalty u/sec.271D vide order dated 10.12.2019 as under:
"GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX RANGE-9, HYDERABAD To Shri SAMREDDY SUDHAKAR REDDY, 4-34, Karnamguda, IBRAHIMPATNAM, Hyderabad. Telangana. India.
21
ITA.No.2309/Hyd./2025
Dated Letter No.
10/12/2019 ITBA/COM/F/17/2019-20/1022037588(1)
Sir/Madam/M/satisfaction
Subject : Penalty Order u/satisfaction271D of the Income Tax Act, 1961 - in the case of Shri SAMREDDY SUDHAKAR REDDY, 4-34, Karnamguda, IBRAHIMPATNAM, HYDERABAD - Asst. Year 2017-2018 - Passing of - Reg.
ORDER U/S 271D OF THE INCOME TAX ACT, 1961 From the facts on records, it is noticed that Shri SAMREDDY SUDHAKAR REDDY, during the financial year 2016-17 relevant to Asst. Year 2017-18 has sold house bearing Municipal No.17-1-336/1/29, Plot No.29, situated at S.N. Reddy Nagar, Saidabad, Hyderabad for a total sole consideration of Rs.43,50,000/- vide Sale deed No 4535/2016, dated 12.09.2016. During this transaction, the vendor accepted Rs.43,50,000/- in cash in contravention to the provision of Section 269SS of the Income-tax Act, 1961 which attracts penalty u/s.271D.
Section 269SS prohibits taking or accepting loan or deposit or any specified sum in excess of Rs.20,000/- otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.
In the above section, the words "Specified sum" was introduced w.e.f., 1-6-2015 by the Finance Act of 2015. "Specified sum" has been defined in explanation (iv) under section 26955 as under:
"Specified sum" means any sum of money receivable, whether as advance or otherwise in relation to transfer of an immovable property, whether or not the transfer takes place.
Section 271D prescribes penalty for taking or accepting any loan or deposit or specified sum. The penalty shall be equal to the amount so taken.
In this matter, as acceptance of cash during the above transaction fits into the definition of "Specified sum", a show cause letter was issued to the assessee vide letter in F. No. Addl. CIT/R-9/Penalty/89/2018-19 dated 13-06- 2019. As there was no response, another notice was issued to the assessee vide 22 ITA.No.2309/Hyd./2025 notice dated 09-11-2019 granting time till 26-11-2019. There has been no compliance for the said notices till date.
In this case, the assessee sold the immovable property for a total consideration of Rs 43,50,000/-. The assessee accepted the entire amount of Rs.43,50,000/- in cash in contravention to the provision of Section 269SS of the Income tax Act, 1961 which attracts penalty u/s 271D.
Despite being given sufficient opportunity, there was no response from the assessee to justify receipt of cash.
Keeping in view the totality of the facts and circumstances of the case, I hereby levy a penalty of Rs.43,50,000/- u/s 271D of the I.T. Act for the A. Yr.2017-18 for violating the provisions of section 269SS of the I.T. Act i.e., accepting cash of Rs.43,50,000/- for sale of immovable property.
This should be paid as per demand notice u/s. 156 enclosed Sd/-MOHAN KUMAR R RANGE-9, HYDERABAD Addl. Commr. of Income Tax, Range-9, Hyderabad."
6. Thus, it is clear from the impugned order u/sec.271D that there was no Reference by the Assessing Officer and also there were no assessment proceedings or any other proceedings in the case of the assessee prior to issuing the show cause notice u/sec.271D r.w.s.274 of the Act. An identical issue has been considered by the Indore Bench of the Tribunal and one of us is the Judicial Member/Vice President is party to the Order in the case of Shri Umakant Sharma vs. JCIT, Ratlam in ITA.No.364 to 366/Ind./2022 dated 19.07.2023 wherein the Tribunal has held in Para Nos.8 to 11 as under:
"8. We have considered rival submissions and carefully perused the relevant material on record. There is no dispute that the assessee has not filed any return of income for the assessment year under consideration. The penalty u/s 271D of the Act has been levied on 23.01.2017 23 ITA.No.2309/Hyd./2025 which is after 8 years from the end of the assessment year under consideration. The limitation for the penalty levied under chapter XXI has been provided in section 275 of the Act which reads as under:
"275. Bar of limitation for imposing penalties (1) No order imposing a penalty under this Chapter shall be passed-
(a) in a case where the relevant assessment or other order is the subject- matter of an appeal to the Deputy Commissioner (Appeals) or the Commissioner (Appeals) under section 246 or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of 4 the Deputy Commissioner (Appeals) or] the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later;
[Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such 24 ITA.No.2309/Hyd./2025 appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the "[Principal Chief Commissioner or] Chief Commissioner or "[Principal Commissioner or] Commissioner, whichever is later.
(b) In a case where the relevant assessment or other order is the subject- matter of revision under section 263, after the expiry of six months from the end of the month in which such order of revision is passed;
(c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.] (IA) In a case where the relevant assessment or other order is the subject- matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 260A or an appeal to the Supreme Court under section 261 or revision under section 263 or section 264 and an order imposing or 25 ITA.No.2309/Hyd./2025 enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the "Principal Chief Commissioner or] Chief Commissioner or the "[Principal Commissioner or] Commissioner or the order of revision under section 263 or section 264 is passed, an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263 or section 264: Provided that no order of imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed-
(a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard;
(b) after the expiry of six months from the end of the month in which the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the "[Principal Chief Commissioner or] Chief Commissioner or the "[Principal Commissioner or] Commissioner or the order of revision under section 263 or section 264 is passed; Provided further that the provisions of sub-section (2) of section 274 shall apply in 26 ITA.No.2309/Hyd./2025 respect of the order imposing or enhancing or reducing penalty under this sub-section]
2. The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March,1989.] Explanation. - In computing the period of limitation for the purposes of this section, -
(i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129.
(ii) any period during which the immunity granted under section 245H remained in force; and
(iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court, shall be excluded.
9. The limitation for passing the order imposing penalty under chapter-XXI has been provided by considering all possible situation where the assessment order or other order is subject matter of appeal of the order is revised under section 263 or assessment order or other orders are subject matter of appeal before the Hon'ble High Court or Hon'ble Supreme Court. Thus, it is clear that section 275, presupposes the existence of assessment proceedings/revision proceedings or appeal proceedings arising from the assessment order or revision order and the limitation is provided as per outcome of 27 ITA.No.2309/Hyd./2025 these proceedings. In absence of assessment in the case of the assessee the initiation of penalty is not valid and further when the satisfaction for initiation of the penalty on the part of the AO is absent in the case of the assessee then the penalty levied u/s 271D is not valid. The Hon'ble Supreme Court in case of CIT vs. Jain Laxmi Rice Mills (supra) has held as under:
"The Tribunal as well as the High Court has held that it could not be so for the simple reason that when the original assessment order itself was set aside, the satisfaction recorded therein for the purpose of initiation of the penalty proceeding Under Sec. 271E would also not survive. This, according to us, is the correct proposition of law stated by the High Court in the impugned order. As pointed out above, insofar as fresh assessment order is concerned there was no satisfaction recorded regarding penalty proceeding under Section 271E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, In so far as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied."
10. Thus, the Hon'ble Supreme Court has affirmed the view of the Hon'ble High Court that in absence of satisfaction recorded regarding the penalty proceedings u/s 271E of the Act the order of levy of penalty is not valid. The Ahmedabad Bench of the Tribunal in case of Vijayaben G. Zalavadia vs. JCIT (supra) has considered an identical issue as under:
28ITA.No.2309/Hyd./2025 "6. We have heard the respective parties and also perused the relevant materials available on record.
7. We find that on the identical set of facts the Punjab and Haryana High Court was pleased observe the following while upholding quashing of penalty by the Tribunal:
"3. We have heard learned counsel for the appellant.
4. The only point for consideration in this appeal is whether the assessee had contravened the provisions of Section 269T of the Act by making repayment of loan/deposits of Smt. Kusum Lata Thakral, through account payee cheque or account payee drafts to M/s. Babyloan Builders Pvt. Ltd., Gurgaon and, therefore, penalty under Section 271E was leviable.
5. The Assessing Officer had levied the penalty amounting to Rs. 11,02,6107- which has been deleted by the Tribunal. The Tribunal while deleting the penalty recorded that the return of the assessee was processed as on 31.12.2003 and the notice u/s. 274 read with section 271E of the Act was issued on 12.06.2007. Such notice was issued when there was no proceedings pending before the Assessing Officer.29
ITA.No.2309/Hyd./2025 Relying upon Delhi High Court judgment in CIT v. Standard Brands Ltd. [20061 285 ITR 295/155 Taxman 383, the Tribunal further observed that action for penalty may be permissible only after regular assessment has been framed and since no regular assessment order had been passed in this case, the recourse to penalty proceedings under Section 27IE were not justified. The findings recorded by the Tribunal read thus:-
"Having heard the parties and having perused the material on record, we find the grievance of the assessee to be correct. In this case, the return of the assessee was processed u/s. 143(l)(a) of the Income-tax Act, on 31.12.2003.
Notice u/s. 274 read with 271E of the Act was issued to the assessee on 12.06,2007. It being a case of processing the return of income, there is no finding in the AO's order with regard to the applicability or otherwise of section 269T of the IT Act to the assessee's case. It was within the purview of the AO to bring the assessee's case to scrutiny and to make regular assessment u/s. 143(3) of the Act. It was also within the power of the AO at the appropriate stage to initiate proceedings u/s. 147 of the Act against the assessee. No such action was taken. Rather, the 30 ITA.No.2309/Hyd./2025 penalty was imposed on the basis of the finding in the case of assessee's wife."
6. No error or perversity could be shown in the aforesaid findings recorded by the Tribunal. Moreover, the assessee had taken a plea before the Assessing Officer that there was a reasonable cause for the assessee to have made direct payment of Rs. 14,02,600/- to M/s. Babyloan Builders Private Ltd., Gurgaon. It was pleaded that some of the repayments made by the assessee were intercompany transfer for group housing and purchase of flat and at times payments were made after closure of banking hours. It was further submitted that the payments made were genuine and no tax evasion was involved and the default, if any, was of technical nature. The explanation being plausible one, it cannot be said that there was no reasonable cause within the meaning of Section 273B of the Act. No substantial question of law arises in this appeal.
8. We find substances in the submissions made by the Ld. A.R. particularly after considering the order passed by the Hon'ble Punjab and Haryana High Court as cited hereinabove. In fact, on the identical set of facts the penalty under Section 271E was deleted by the Tribunal and further upheld by the Hon'ble High Court. 9. Having regard to the facts and circumstances of the case and the ratio laid down in the order passed by the Punjab and Haryana High Court, we do not hesitate to hold that the 31 ITA.No.2309/Hyd./2025 impugned penalty under Section 271E is not permissible in the absence of regular assessment framed against the assessee by the Revenue. Hence, the same is not found to be sustainable in the eye of law and, thus, quashed. The appeal preferred by the assessee is, therefore, allowed."
11. Therefore, it is pre-requisite condition that the initiation of penalty 271D/271E of the Act, there must be assessment proceedings or proceeding arising from assessment order are pending in the case of the assessee. Accordingly in the facts and circumstances of the case and following the judgment of Hon'ble Supreme Court as well as Coordinate Bench of the Tribunal in case of Vijayaben G. Zalavadia vs. JCIT (supra), we hold that the penalty levied u/s 271D of the Act without any assessment proceedings in the case of the assessee is not valid and liable to be quashed. We order accordingly."
7. Thus, it is a pre-requisite condition for initiation of the penalty u/sec.271D/271E of the Act that there must be an assessment proceeding or proceedings arising from assessment order or any other proceedings under the Act. This aspect is also clarified by the CBDT vide Circular No.9/2016 dated 26.04.2016. We further note that recording of satisfaction by the Assessing Officer in the original assessment order for the purpose of initiation of proceedings u/sec.271D/271E is a mandatory condition as held by the Hon'ble Jurisdictional High Court in the case of Srinivas Reddy Reddappagari vs. JCIT (supra) in Para Nos.21 to 28 as under:
[ "21. Thus, sub-section (1) of Section 271E of the Act provides that if a person repays any loan or deposit or specified advance referred to in Section 269T of the Act otherwise than in 32 ITA.No.2309/Hyd./2025 accordance with the provisions of that section, he shall be liable to pay by way of penalty a sum equal to the amount of the loan or deposit or specified advance so repaid. Sub-section (2) clarifies that any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.
22. From an analysis of Sections 271D and 271E of the Act, it is seen that both the provisions are pari materia to each other. While Section 271D of the Act would be attracted on a person accepting loan or deposit or specified sum in contravention of Section 269SS of the Act, penalty under Section 271E of the Act would be imposable on a person who makes or repays the loan or deposit or specified advance in contravention of Section 269T.
Therefore, in a way, the two provisions are complimentary to each other.
23. In Jai Laxmi Rice Mills Ambala City (supra), Supreme Court considered the question as to whether penalty proceedings under Section 271D of the Act is independent of the assessment proceeding? In the facts of that case, it was found that the penalty order was issued following the assessment order. However, in appeal, Commissioner of Income Tax (Appeals) had set aside the original assessment order with a direction to frame assessment de novo. In the fresh assessment order, no satisfaction was recorded by the assessing officer regarding initiation of penalty proceedings under Section 271E of the Act. It was noticed that the penalty order was passed before the appeal of the assessee was allowed by the Commissioner of Income Tax (Appeals). It was in that context that Supreme Court held as follows:
33ITA.No.2309/Hyd./2025 The Tribunal as well as the High Court has held that it could not be so for the simple reason that when the original assessment order itself was set aside, the satisfaction recorded therein for the purpose of initiation of the penalty proceeding under Section 271E would also not survive. This according to us is the correct proposition of law stated by the High Court in the impugned order.
As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 271E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, insofar as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied. These appeals are, accordingly, dismissed.
24. Reverting back to the facts of the present case, we find that petitioner had submitted reply to the show cause notice on 02.06.2022. In his reply, petitioner mentioned that no satisfaction was recorded by the assessing officer in the assessment order as to infraction of Section 269SS of the Act. Therefore, no penalty could be levied under Section 271D of the Act without recorded satisfaction. In this connection, reference was made to the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (1 supra) wherein it was clarified that provisions of Section 271E are in pari materia with the provisions of Section 271D of the Act. However, this aspect of the matter was not considered by respondent No.1 while passing the impugned order. Respondent No.1 relying upon the Kerala High Court decision in Grihalaxmi Vision (2 supra) noted that competent authority to levy penalty is the Joint Commissioner. He has also referred to an earlier decision 34 ITA.No.2309/Hyd./2025 of the Supreme Court in CIT V. Mac Data Ltd. wherein it was observed that assessing officer has to satisfy himself as to whether penalty proceedings should be initiated or not. Assessing officer is not required to record his satisfaction in a particular manner or reduce it into writing. Therefore, respondent No.1 imposed the penalty under Section 271D of the Act.
25. We are afraid respondent No.1 had completely overlooked the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (supra). In the said decision as extracted above, Supreme Court had concurred with the view taken by the High Court holding that satisfaction must be recorded in the original assessment order for the purpose of initiation of penalty proceedings under Section 271E of the Act. We have already discussed above that provisions of Section 271E and 271D of the Act are in pari materia. When there is a decision of the Supreme Court, it is the bounden duty of an adjudicating authority, be it an income tax authority or any other civil authority or for that matter any court in the country, to comply with the decision of the Supreme Court.
26. Article 141 of the Constitution of India is clear that law declared by the Supreme Court shall be binding on all courts within the territory of India. This is further clarified in Article 144, which says that all authorities, civil and judicial, in the territory of India shall act in aid of the Supreme Court. We are therefore, of the unhesitant view that respondent No.1 overlooked the relevant 35 ITA.No.2309/Hyd./2025 considerations while passing the impugned order dated.29.11.2022.
27. Further, issue in the present writ petition is not the competence of the Joint Commissioner in issuing the order of penalty. Therefore, reference to Grihalaxmi Vision (supra) was wholly unnecessary.
28. Consequently, we set aside the impugned order dated 29.11.2022 and remand the matter back to the file of respondent No.1 to pass a fresh order in accordance with law after giving a reasonable opportunity of hearing to the petitioner."
8. We have specifically given an opportunity to the learned DR to produce relevant record if any, to show that some proceedings were initiated in the case of assessee and satisfaction was recorded by the Assessing Officer. However, the learned DR has submitted that no record was made available by the Assessing Officer. Accordingly, in the facts and circumstances of the case and in the interest of justice and by following the decision of Hon'ble Jurisdictional High Court as well as the decisions of various Coordinate Benches of the Tribunal including the decision of ITAT, Indore Bench in the case of Shri Umakant Sharma vs., JCIT, Ratlam (supra), we hold that the penalty levied by JCIT u/sec.271D without recording the satisfaction in assessment proceedings or any other proceedings under the Act, is not valid and liable to be quashed. We Order accordingly."
9.4. Accordingly, by following the binding precedents as well as earlier decisions of this Tribunal, we hold that the 36 ITA.No.2309/Hyd./2025 penalty levied u/sec.271D without satisfaction recorded by the Assessing Officer in the assessment order is invalid and the same is set aside. The decisions relied upon by the learned DR are not on the point of satisfaction to be recorded by the Assessing Officer in the assessment order but the said Judgment is on the issue of limitation for initiation of the proceedings and passing the penalty order as per the time limit provided u/sec.275(1)(c) of the Act. Accordingly, the said Judgment of Hon'ble Kerala High Court in the case of M/s.
Vee Ess Hardwares, Ambalapuzha, Alappuzha District, State of Kerala vs. ACIT (Circle), Alappuzha & Anr. (supra) will not help the case of the Revenue.
10. In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court on 30.04.2026.
Sd/- Sd/-
[MANJUNATHA G.] [VIJAY PAL RAO]
ACCOUNTANT MEMBER VICE PRESIDENT
Hyderabad, Dated 30th April, 2026.
VBP
37
ITA.No.2309/Hyd./2025
Copy to :
Nithyananda Rao Volimineni, H.No.5-3-2, Main Road,
1. Rudrangi, Siricilla, KARIMNAGAR - 505 302. State of Telangana.
The Income Tax Officer, Ward-2, Income Tax
2. Office, Aayakar Bhavan, Near Natraj Theatre, KARIMNAGAR - 505 001. Telangana.
3. The Pr. CIT, Hyderabad.
4. The DR, ITAT, "B" Bench, Hyderabad.
5. Guard file.
BY ORDER VADREVU Digitally by VADREVU signed PRASADA PRASADA RAO Date: 2026.04.30 RAO 12:26:28 +05'30'